According to NCERT, why do people keep demand deposits in banks even when these deposits do not earn any interest?
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → Cheques and debit cards make transactions convenient and safer.
A demand deposit lets people pay by cheque or debit card. This is easier and safer than carrying large amounts of cash, so people keep such deposits even without interest.
Option (1) Banks charge no fee on demand deposits, unlike goldsmiths. — Incorrect. The reason given is convenience and safety, not fees.
Option (2) Demand deposits are legal tender and cannot be refused. — Incorrect. Cheques on demand deposits can be refused; they are not legal tender.
Option (3) Demand deposits cannot be withdrawn before a fixed date. — Incorrect. That describes time deposits; demand deposits are payable on demand.
Option (4) Cheques and debit cards make transactions convenient and safer. — Correct. This is why people keep them.
NCERT (2026-27): “Commercial Banks … The modern banking system works precisely the way Lala behaves in this example. … Also, it may be safer to keep excess funds in a bank, rather than at home, just as people in the example above preferred to keep their gold with Lala instead of keeping at home. In the modern context, given cheques and debit cards, having a demand deposit makes transactions more convenient and safer, even when they do not earn any interest. (Imagine having to pay a large amount in cash - for purchasing a house.)” |